Published: 2021-09-10 23:35:10
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Category: Business

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To what extent can Wal-Mart’s performance be explained in terms of industry structure, and to what extent in terms of its competitive position?Wal-Mart’s performance is absolutely sensational and amazing. Growth in terms of company sales and market valueAccording to the paper, Wal-Mart had sales of $67 billion in 1993, with earnings nearly $2.3 billion. By end of 1993, Wal-Mart had a market value of $57.5 billion. (1)Growth in terms of company size At the beginning of 1994, the company operated 1,953 Wal-Mart stores (including 68 supercenters), 419 warehouse clubs (Sam’s Clubs), 81 warehouse outlets (Bud’s), and four hypermarkets. (1)Growth compare to the competitorExhibit3 of the paper, Wal-Mart has the highest sales ($44900 millions) compared to the competitors in 1993. In terms of five year average ROE, Exhibit 4 shows Wal-Mart has the highest ROE ($31.2 millions) compared to the competitors.Growth compare to the industry averageWal-Mart sales per square foot were nearly $300 compared with the industry average of $210.Table 1 shows Wal-Mart has highest sales by product category in 1993. Wal-Mart has produced incredible profitability in terms of performance; Wal-Mart has achieved strong growth since first store opened in 1962. Michael Porter’s five force industry analysis (2)Supplier power: Strong turns to MediumWal-Mart is a no-nonsense negotiator. It has set up standardised process and activities for suppliers to follow. In the beginning, some strong suppliers decided how much to sell and the price, such as P&G. Over time, Wal-Mart has turned relationships from supplier to partnership, by sharing information (EDI) to improve performance for both parties gaining profit.Customer power: Weak to MediumWal-Mart’s business is B2C, business to customer. The customers hold weak position against Wal-Mart, particularly in those small rural towns. However, customer has more freedom to choose when other competitors step into those locations to develop price war against Wal-Mart and the switching cost is low. Substitute: StrongRetailing grocery shops are not high technology, product categories are easily replicated and also there are others shops could buy same or similar products.  New entrants: WeakIt would not cost too much for a new local grocery shop to open. However, the cost leadership advantage could be barrier for new entrants.          

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